SECOND QUARTER, 2024
- The Fund returned -1.68% versus 2.63% for the MSCI World Index (Net) for the quarter, and 7.39% since inception versus 7.47% for the MSCI World Index (Net) over the same period.
- At the sector level, the largest contributors were communication services and consumer discretionary, while the largest detractors were health care and industrials.
- Geographically, 59.0% of the portfolio was in the U.S., 23.2% in Europe ex U.K. and 10.8% in the U.K. For the quarter, the Netherlands, Switzerland and the U.K. were contributors to the relative performance of countries owned. The U.S., Germany and South Korea detracted from relative performance. Emerging markets accounted for 7.1% of the portfolio.
TOP CONTRIBUTOR | DETRACTOR
Top contributor
Alphabet (GOOG, Financial) was the top contributor during the quarter. The stock price rose after the U.S.-based communication services company reported first-quarter operating income growth of 31% versus the prior year. We believe management's cost reduction initiatives will improve operating efficiency and lead to faster earnings growth. In addition, we expect the company's new AI-powered features showcased at the recent Google I/O conference will increase the value of its products to users. At the current share price, we continue to see upside to our estimate of Alphabet's intrinsic value.
Top detractor
CNH Industrial (CNH, Financial) was the top detractor during the quarter. The U.S.-headquartered manufacturer of agriculture and construction equipment announced that CEO Scott Wine will be replaced by Gerrit Marx, CEO of Iveco Group, effective July 1, 2024. Scott made significant contributions to CNH Industrial in the areas of product, technology, and cost efficiency and we were disappointed to see him leave the business. We met with both Executive Chair Suzanne Heywood and Scott in April, which provided insight into the management change. CNH Industrial also slightly reduced guidance for 2024 when reporting first quarter results due to a weaker agriculture equipment market. This reduction was consistent with our forecasts and does not impact our view of the long-term profitability potential of the business. We believe that CNH Industrial's position within the structurally attractive agriculture equipment market will improve in the coming years. As a result, we continue to believe the stock is compelling.
PORTFOLIO ACTIVITY
There were no new purchases during the quarter, and we eliminated our position in NAVER (XKRX:035420, Financial) during the quarter.
PORTFOLIO MANAGERS
(Year joined Harris | Oakmark)
David G. Herro, CFA (1992)
Tony Coniaris, CFA (1999)
Eric Liu, CFA (2009)
M. Colin Hudson, CFA (2005)
John A. Sitarz, CFA, CPA (2013)
Past performance is no guarantee of future results. The performance data quoted represents past performance. Current performance may be lower or higher than the performance data quoted. Total return includes change in share prices and, in each case, includes reinvestment of dividends and capital gain distributions. The investment return and principal value vary so that an investor's shares, when redeemed, may be worth more or less than the original cost.
The information, data, analyses, and opinions presented herein (including current investment themes, the portfolio managers' research and investment process, and portfolio characteristics) are for informational purposes only and represent the investments and views of the portfolio managers and Harris Associates L.P. as of the date written and are subject to change and may change based on market and other conditions without notice.
This content is not a recommendation of or an offer to buy or sell a security and is not warranted to be correct, complete or accurate.
Certain comments herein are based on current expectations and are considered “forward-looking statements.” These forward looking statements reflect assumptions and analyses made by the portfolio managers and Harris Associates L.P. based on their experience and perception of historical trends, current conditions, expected future developments, and other factors they believe are relevant. Actual future results are subject to a number of investment and other risks and may prove to be different from expectations. Readers are cautioned not to place undue reliance on the forward-looking statements.
